City pay is no side issue: it’s an affront to society

Roger Bootle says it’s wrong to argue that bankers’ bonuses are the price we have to pay for economic success

The smart thing to say — indeed, Allister Heath said it in last week’s issue — about bankers’ pay is that it doesn’t really matter: it’s a distraction from more serious concerns about regulation or the structure of the financial system. Supposedly, people who express amazement and disgust at what bankers receive are motivated by feelings of envy, and they just don’t understand the way the City works. If a bunch of bankers makes a few hundred million pounds or dollars — it hardly matters which currency the amount is denominated in — by trading options on the volatility in the dingbat, that’s fine. In fact, so much the better for the rest of us because this creation of wealth will benefit us all. Extra taxes will be paid and extra demand created. Supposedly.

Of course, where banks and bankers have been saved with public money — and that means just about all of them — there is a perfectly obvious and legitimate reason for resentment. The taxpayer has provided the funds without which the business could not carry on, and yet the taxpayer has not benefited from the return of the good times, while the bankers have. Even those who seek to defend bankers’ pay feel obliged to admit that taxpayers have got a raw deal. But you could say that this is due as much to the incompetence of those organising the rescue packages as to the greed of those being rescued.